Be Prepared! Ask Hard Questions

In the early hours of November 9, 2001 I was awakened from a sound sleep. It was my mother. She had received an earlier phone call about my father, her former spouse. All she knew was that my father had been rushed to the hospital. When my brother and I arrived at the hospital our father was in a coma. They let us see him. He just looked like he was sleeping. We reasoned that he was doing just that—sleeping and that upon our return to the hospital he would have come out of the coma. We returned to the hospital several times after November 9th. Each time my father remained in his comatose state. The doctors gathered my brother and I to let us know that there was no hope. They had run a battery of test that revealed that his brain had suffered irreversible damage and that if he woke up he wouldn’t be able to function.

My brother and I could only assume what our father’s final wishes were. There was no living will. No medical directives. So unfortunately we had to leave our father connected to an artificial respirator for about 2 months. Without a living will or medical directives my father’s siblings engaged us in a battle to keep him connected indefinitely while we wanted to disconnect him so that he could die with dignity. We based our decision on the premise that we thought our father wouldn’t want to live—or not live—in that state.

My brother pointed out, what seemed the only bright spot in all of this. He said “well daddy has insurance to bury him”. I quickly remembered a conversation that my father and I had about a year or so prior. He called me out of the blue to say “if something ever happens to me everything will be taken care of”. I interpreted what he said to mean he had an insurance policy that would pay to bury him. I don’t remember how I responded to my father. I just know that I wasn’t surprised. After all, he was the same dad who invited the insurance agent to the house just days after I was born to purchase a permanent life insurance policy for me. He did the same thing when my brother was born (except this time he met the insurance agent at the office).

As promised my father did have an insurance policy. The policy would pay as much as $150k to the beneficiary. Unfortunately, my father had purchased an accidental death & dismemberment (aka AD&D) policy. Basically this means if my father had slipped and fell, been shot or anything accidental the policy would have paid out. We were able to come up with the money to give our father a proper send off. I’ve often wondered since then why I didn’t ask to see the policy or ask who the company was or ask where he kept the policy. I know why I didn’t ask. My father was always very savvy about insurance and financial matters. I assumed that he had it all under control.

And so on December 26, 2001 after I had taken and passed the Indiana Property and Casualty Exam (I was on my way to becoming an insurance agent) I visited my father for the last time. I had no idea where insurance would take me but I knew that my mission was grounded in educating people on insurance matters.

If I could do it all over again I would make sure my father had a living will. His not having one caused so much tension and dissension between his children and his siblings. Plus we had no idea what my father wanted. I would make sure he had a life insurance policy that would pay in the event of an accident or not. I get asked all the time which is better term or permanent policies. The answer is…neither is better than the other. It depends on what your needs are.

Let’s discuss the differences. Term insurance is sometimes referred to as temporary insurance. It is referred to as temporary because you have it for a temporary period of time, a time less than your entire life. Purchasing term policies is like renting an apartment. When you rent an apartment you sign a lease (in a term policy you decide what you want the term to be-for example a young married couple has purchased their first home and are having their first baby. If either wage earner died it would likely have an impact on the entire household. It may mean, without a policy, that the family would have to move.

However, had the couple purchased a 30 year term policy in the amount of $500,000 the proceeds could be used to pay off the home and other debts, and/or help to establish a college fund for child). Once you sign an apartment lease you are expected to pay rent (in a life insurance policy this would be your premium) and as long as you do you are provided coverage or a place to stay. While you’re paying rent your landlord is not putting a portion aside as a savings for you. At the end of your lease you don’t get anything, except the satisfaction of knowing that when you needed shelter it was there. So it is with a term policy.

At the end of a term policy if your policy included an option to renew you will be notified that you can renew your policy without proving you are healthy. You definitely want this option (comes standard in most level term policies) in the event that your health has declined. Without this option you would be forced to answer health questions that may prohibit you from getting a new policy. With the option to renew your premium will increase.

In the example I chose a 30-year term because typically a house mortgage is 30 years. At the end of the 30 year term the young family is not so young anymore, their house is more than likely paid off, their children have, hopefully, completed college, and business debts are probably paid off. In other words the couple now needs less money than they did as new homeowners and new parents.